Tom Standish Group President & COO Regulated Operations CenterPoint Energy Visions of the Smart Grid: Deconstructing the traditional utility to build the virtual utility

The Traditional Utility

Smart Grid Vision Create a digital communication path to enable information flow for operation and control of the efficient production, transportation and use of energy.

Smart Meters

Requirements Two-way digital communication between host and meter to provide: 1.Interval meter data 2.Real-time price support 3.In-home two-way communications 4.Remote connect/disconnect Benefits Demand response Energy efficiency Smart homes Less generation Savings justify the cost of infrastructure

Smart Meters – Outcome Little change in utility structure Significant gains in load smoothing Most control handled by utility with more information provided to customers More knowledge of their consumption Consumers begin to become more active participants Improved operating efficiency Savings support further grid enhancements

The Intelligent Grid

Intelligent Grid Requirements Need to meet ever- increasing customer expectations of reliability and power quality Need to care for aging infrastructure Benefits Improved power quality and reliability Self-healing grid Improved fault detection Diagnostics for outage prevention Optimized life of electrical assets Help offset decline in workforce Reduced costs

Intelligent Grid – Outcome Still a utility-centric paradigm Improved system reliability Improved outage response Improved customer satisfaction Extended life of electrical assets Operational improvements Savings The foundation is set for utility transformation

Distributed Generation

Requirements Market drives requirements Need to address rising consumer costs Energy Transportation (PHEVs) Connecting distributed generation to the grid Benefits Real demand response Time-of-day response Environmental benefits

Distributed Generation – Outcome High energy prices and environmental awareness awaken consumers to alternative energy choices Utility-centric paradigm shifts to the consumer Empowerment of power-generating consumers The grid doesn’t disappear, but … … it begins to operate in a new way

The Virtual Utility

Requirements Willing participation in creation of user-friendly Internet solutions Seamless integration Plug-and-play compatibility Consumers must be more interactive participants Power sharing Benefits Expansion of market- driven energy services Energy efficiency Environmental benefits Benefits shared across the energy chain among utilities and non-utilities Consumers better understand and control their energy usage Smart homes

The Virtual Utility – Outcome The Virtual Utility is the outcome of the convergence of Smart Meters, the Intelligent Grid and Distributed Generation Deconstruction of the old paradigm – the utility is no longer in control Consumers choose automated or manual energy management The market takes over, drives solutions Market solutions close gap of consumer expectations

Obstacles Expense Scope of technology change Resource strains Time is not our friend Aging workforce Aging infrastructure Rising consumer expectations Cultural barriers

Obstacles Short-term thinking Inability to imagine the new virtual utility paradigm Lack of collaborative spirit Lack of coordinated R&D b/w utilities and vendors Lack of standards, definitions, interoperability Unwillingness to deconstruct the paradigm

Solutions Cost may slow project, not stop it Assess cost of not automating Holistic, not piecemeal approach Capture institutional knowledge Spread the vision, let go of fear, embrace the future

Solutions Develop a roadmap Take the APQC survey Mandates and the market drive solutions Collaboration Willingly participate in user-friendly solutions National standards Shape the future before it shapes us

The Virtual Utility Digital communications ignites the transformation Realization of the Home Area Network Deconstructing the old paradigm Growth opportunities are non-traditional Collaborative management of the market Generators TDUs ISOs Vendors REPs Consumers Utilities that quickly adapt will be most successful

The Virtual Utility – a final challenge